[Ip-health] New taxes on medicines set to hit hard on poor

[Riaz K. Tayob]

Yes this is a "strange" over sight by our theoreticians. In fact it
would be great to see research conducted on the loss of "innovation"
occasioned by recognising both product and process patents - as may have
occurred in India with the onset of TRIPs. If IPRs stimulate innovation
then this loss (albeit on the production side) needs to be taken into
account very seriously. And Indian manufacturers have been very adept at
producing bio-equivalent products with more efficient production
techniques. These dead weight losses are not adequately studied, in my
view, because these arguments are typically and mainly presented to
adduce a defense for Big Pharma rather than a rational and cogent approach.

But to be candid, free traders that support monopoly IPRs without
providing theoretical rationalisations for their positions operate in a
lacunae where literally anything is possible. I am comfortable with a
critique on high tariffs when it is contextualised simultaneously with a
critique of the inexcusable behaviour of Big Pharma - who are well
documented to be systematic abusers of their monopoly powers. That makes
sense because it is rational.

However, without such a balance, these critiques become simply a veiled
defense for Big Pharma. For me, such arguments may actually be perverse
free trade arguments which is recognised by Bhagwati - a glaring
omission in Gelder's rebuttal, even though Bhagwati would support tariff
cuts. Arguments for liberalisation at the national level become
supportive of global monopolists as they are the only one's (by virtue
of their monopoly position) to benefit from the liberalisation - as
seems to be the case with the issue as raised on Tanzania.

As always I am open to be corrected or shown to be wrong, with a benign
caveat: the stated position must be rational or at least
intra-systemically coherent, whatever paradigm one adopts.

riaz (pers)

Dean Baker wrote:
> Riaz,
>
> I think you'll find that "free-trade" economists do their best to ignore
> the distortions created by patents or other IPRs. You will be hard-presse=
d
> to find any serious research that shows that the patent system is a more
> efficient mechanism for financing drug development than mechanisms
> that allow for marginal cost pricing, such as a prize system or direct
> public financing.
>
> It is remarkable that there are literally thousands of journal articles
> that
> examine the distortions created by relatively modest tariffs on shoes
> and shirts,
> but almost nothing written on the distortions created by drug patents
> that raise
> prices by several hundred percent above the free market price.
>
> Dean
>
>
> Riaz K. Tayob wrote:
>> I am not talking about Italians and economic growth - I was referring to
>> the "breaking" of patents by using compulsory licenses to ensure
>> affordable products. Somehow the mainstream press did not think it was a
>> significant move but waxed lyrical on Thailand, for instance.
>>
>> Sure Baghwati would agree that tariffs are bad - on that I agree. But
>> what would a free trade position be on IPRs per se? This is purely from
>> a perspective of theoretical coherence and rationality.
>>
>> And on taxing the sick - what is your position on differential pricing,
>> monopoly pricing and supernormal profits of big pharma - that would be
>> interesting context for us all to understand your position on these
>> outrageous Tanzanians. Could you clarify your position on these issues?
>>
>> It is also interesting to note that your site promotes a book on
>> fighting diseases which I waded through a while back . A quote from one
>> of the blurbs (emphasis in CAPS added - there are other gems in the work
>> but this suffices for now):
>>
>> Chapter 5: Increasing access to medicines (pdf: 144 kb)
>> Prof Khalil Ahmed, Franklin Cudjoe, Eustace Davie, Dr John Kilama, Prof
>> Mar=EDn Krause, Andr=E9s Mejia, Barun Mitra, Nonoy Oplas, Mart=EDn Simon=
etta,
>> Philip Stevens, Jose Luis Tapia, Margaret Tse, Jasson Urbach
>> Access to medicines in less developed countries is hindered by a series
>> of self-generated policy failures including: weak healthcare
>> infrastructure, regulatory environments that are hostile to health
>> insurance markets and other risk-pooling mechanisms, taxes, tariffs and
>> price controls on medicines. INTELLECTUAL PROPERTY IS RARELY A BARRIER
>> TO ACCESS TO MEDICINES. Rather, it a vital incentive for the development
>> of new drugs for the diseases of poverty.
>>
>> Is this the position of the IPN? Because that would explain the position
>> you take and we can dispense with further ado.
>>
>> riaz (pers)
>>
>>
>>
>> Alec van Gelder wrote:
>>> Going back to my original e-mail and the article I forwarded below,
>>> I'm not
>>> able to find any reference to Italy, Italians or their less than
>>> illustrious
>>> track record on economic growth.  Nor am I responsible for what is
>>> written
>>> in the "mainstream media".  With regards to Jagdish Bhagwati, one of th=
e
>>> world's eminent experts on trade, I'm fairly confident that he would
>>> disagree with the outrageous tariff levied on medicines in Tanzania.
>>> And he
>>> would be correct: the tariff amounts to an unnecessary tax on the sick.
>>>
>>> -----Original Message-----
>>> From: ip-health-admin@lists.essential.org
>>> [mailto:ip-health-admin@lists.essential.org] On Behalf Of Riaz K. Tayob
>>> Sent: 31 July 2007 17:44
>>> To: ip-health@lists.essential.org
>>> Subject: Re: [Ip-health] New taxes on medicines set to hit hard on poor
>>>
>>> I am, however, surprised that WHO articulates a 0 tariff policy when
>>> countries face ridiculously inflated prices for many imported medicines=
,
>>> face currency volatility that affects prices and are proscribed by
>>> intellectual property rules from developing local supply capacity
>>> especially
>>> in a sector where "learning by doing" is not an option - you just
>>> have to
>>> get it right the first time... has WHO consulted on this?
>>> Is it so obvious that developing countries must only be consumers and
>>> not
>>> producers?
>>>
>>> I agree that the measure needs to be taken to secure supply to
>>> patients, but
>>> to "simply" call this policy outrageous is outrageous - especially when
>>> contextualised in 1) the WHO stance on this, 2) the fact that Italy
>>> can use
>>> compulsory licenses without a whimper from the mainstream press but whe=
n
>>> other countries use it they are slated for "breaking patents"
>>> and threatening the innovation system - are Italians more equal than
>>> Tanzanians?
>>>
>>> Funny that an organisation peddling the virtues of the Free Market
>>> supports
>>> monopoly IPRs? Perhaps we could check the views of Jagdish Baghwati
>>> on this
>>> as he is a pre-eminent free trade theorist?
>>>
>>> rt (pers)
>>>
>>> Alec van Gelder wrote:
>>>> This is a multi-part message in MIME format.
>>>> --
>>>> [ Picked text/plain from multipart/alternative ] I am somewhat
>>>> surprised this outrageous policy in Tanzania hasn't been discussed.
>>>>
>>>> http://www.ippmedia.com/ipp/guardian/2007/07/26/95148.html
>>>>
>>>> New taxes on medicines set to hit hard on poor
>>>>
>>>> 2007-07-26 09:44:43
>>>> By Perege Gumbo
>>>> Fears are emerging that the poor are likely to be crowded out of
>>>> access to
>>> some basic medication as newly announced taxes tend to make them more
>>> expensive.
>>>> A lump sum 10 percent import duty was imposed by the government on all
>>> pharmaceutical products outside the so called ?essential drugs?.
>>> Industry
>>> dealers have said this would automatically translate itself into higher
>>> market prices for patients.
>>>> These concerns are now the subject of dialogue between the
>>>> pharmaceutical
>>> products` dealers and the Tanzania Private Sector Foundation (TPSF)
>>> as they
>>> seek audience with responsible government authorities to discuss this
>>> matter
>>> of public interest.
>>>> The matter has brought two business lobby groups at logger heads. The
>>> Confederation of Tanzania Industries (CTI) is said to have urged the
>>> government the impose 10 percent import duties on pharmaceutical
>>> products,
>>> hoping this would protect infant domestic medicine industries.
>>>> ``We asked the government to impose the 10 percent duty to
>>>> capacitate our
>>> local pharmaceutical industries grow as they now have big production
>>> capacity to sufficiently cater for the local market demand`` the CTI
>>> Director of Policy and Research Hussein S. Kamote said.
>>>> He refuted the notion that the duty was going to affect poor people
>>>> saying
>>> that the essential drugs, anti-retrovirals (ARVs), anti-malaria, and
>>> anti-tuberculosis medicines would be exempted from the duty.
>>>> But Kamote`s arguments have vehemently been countered by the
>>> pharmaceutical importers who claim that the local pharmaceutical
>>> industry
>>> was still far behind from meeting the local market demand.
>>>> Their side of view is apparently supported by the Tanzania Private
>>>> Sector
>>> Foundation (TPSF) who jointly said that about 80 percent of the drugs
>>> circulating in the local market were being imported.
>>>> The Tanzania Association of Pharmaceutical Industries (TAPI) chairman
>>> Harish Dhutia said the Tanzania?s medication market was experiencing
>>> ``a cut
>>> throat competition whose 10 percent import duty addition would adversel=
y
>>> affect the poor``.
>>>> He argued that from simple economic principles, the end buyers of
>>>> the drug
>>> are the sick people who have no alternatives when it comes to getting
>>> medication that is not manufactured locally.
>>>> The imposition of duty on medics would just worsen the matter
>>>> bearing in
>>> mind that the two partner states in the framework of East African
>>> Community-Kenya and Uganda, have decided to level zero percent on the
>>> same
>>> products.
>>>> Kenya decided to zero-rate the imported pharmaceutical drugs despite
>>>> the
>>> fact that it has the largest production capacity as well as numerous
>>> industries as when compared Tanzania.
>>>> There are ranges of imported medical products that are not being
>>> manufactured by the local pharmaceutical industries.
>>>> TAPI and TPSF are of the view that the government should reconsider th=
e
>>> issue by waiving value added tax (VAT) on local pharmaceutical
>>> industries,
>>> or even better lower income tax rates or other export incentives if
>>> it were
>>> serious about protecting local drug industries.
>>>> In a recent breakfast meeting organized by the Tanzania Food and Drugs
>>> Authority (TDFA), participants unanimously agreed to seek
>>> consultations with
>>> responsible government authorities over the matter.
>>>> The President of the Tanzania Chamber of Commerce, Industries and
>>> Agriculture (TCCIA) who is also one of the executives of the TPSF
>>> took the
>>> responsibilities to lead the dialogue process.
>>>> Two years ago, pharmaceutical industries lobbied for the 10 percent
>>> imposition as import duty in vain.
>>>> The then Minister for Finance Basil Mramba rejected the request on the
>>> grounds that the important person was the patient and not the
>>> pharmaceutical
>>> companies.
>>>> *    SOURCE: Guardian
>>>>
>>>> Alec van Gelder
>>>> Research Fellow
>>>> International Policy Network
>>>>
>>>> 3rd Floor, Bedford Chambers
>>>> The Piazza, Covent Garden
>>>> London WC2E 8HA
>>>> Tel: +44 20 7836 0750
>>>> Fax: +44 20 7836 0756
>>>> Mobile: +44 (0) 779 661 6424
>>>>
>>>> www.policynetwork.net <http://www.policynetwork.net/>
>>>>
>>> .......................................................................=
.....
>>>
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